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Bribery Act 2010: implications for accountants

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12th Apr 2011
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IBB Solicitors partner Anil Rajani

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summarises the Bribery Act 2010 guidance and the important implications for accountants.

The countdown to the implementation of the Bribery Act 2010 has now started.

The publication on 30 March of guidance on adequate procedures served as a firm reminder to the commercial sector that firms now have less than three months to get to grips with the legislation and implement these procedures, or face investigation and even prosecution at the hands of the Serious Fraud Office (SFO).

The Act creates four new offences:

  • bribing another person
  • accepting or receiving a bribe from another person
  • bribing a foreign official
  • failure by a commercial organisation to prevent bribery

Offences one to three can be committed by an individual or a business, if the acts constituting the offence can be attributed to a senior member or employee in the organisation.

This will be of particular concern in identified cases of bribery where senior employees or directors are found to have had knowledge of the alleged incident, whether or not they explicitly authorised or approved it.

A lateral as well as top down approach will be taken, so if it can be established that, for example, a company’s financial director or accounts manager had knowledge of acts within the organisation which constituted an offence under the act, not only could they find themselves personally liable, but if they are sufficiently senior within the organisation the courts could also impose liability on the company as a whole. 

The fourth offence is a corporate only offence, and it is this which is causing concern for firms and businesses all over the world, because the drafting of the Act means that any company carrying on business or part of a business in the UK can be prosecuted.

Common sense approach

This has caused understandable consternation world-wide. In an attempt to assuage doubts, Kenneth Clarke in his guidance makes assurances that a common sense approach will be taken, and that only organisations with a demonstrable business presence in the UK will be affected.

However, ultimately he concedes, it is a matter for the courts to decide whether or not an organisation ‘carries on a business in the UK’. It therefore remains to be seen how widely the courts are willing to construe this jurisdiction.

The issue should further be considered in light of comments made by the director of the SFO, Richard Alderman, who has confirmed that he aims to adopt a broad interpretation of jurisdiction under the Act. He has also confirmed that he is not afraid to pursue prosecutions against organisations even when there is little more than a UK stock market flotation tying the company to the UK.

Consequently, UK firms with international roots and ties will need to ensure that they have a firm grip on operations overseas, as it would seem that remoteness will not keep the SFO at bay. Until further guidance has been handed down by the courts, firms would be well advised to adopt a very broad interpretation of these provisions.

Hospitality

Another key area of concern for firms and businesses is the extent to which corporate hospitality and promotional expenditure might constitute an offence under the Act. The MOJ guidance draws a distinction between reasonable and proportionate corporate hospitality, and hospitality or promotional spending deliberately employed as a bribe.

There is therefore a grey area between reasonable hospitality expenditure and lavish, disproportionate expenditure which could constitute an offence. Firms will have to ask themselves when considering corporate hospitality whether proposed spending is commensurate with the reasonable norms for their industry. If the answer is ‘no’, there should be cause for concern.

Furthermore, simply asserting that the expenditure incurred was within the norms for your particular industry will not necessarily exculpate you if there is evidence of a specific intention to bribe. Firms will need to ensure that they continually monitor accepted practice and regularly review what is commercially proportionate when considering hospitality and promotional expenditure.

Conclusion

Firms which can prove that they have taken such precautionary measures should be afforded the protection of section 7 (2) of the Act if they find themselves facing prosecution for failure to prevent bribery.

The Act provides a defence if organisations can prove that they had in place at the time the bribery was committed, adequate procedures to prevent such acts.

The MOJ guidance sets out six principles to guide firms when devising such procedures, with a particular focus on risk assessment and proportionality. Companies should adopt a risk based approach when considering what would constitute adequate procedures for preventing bribery within their sector.

It is clear that the MOJ does not envisage smaller firms incurring crippling expenses drafting reams of internal policies and implementing complex procedures for preventing bribery, but an ability to demonstrate an awareness of the risks and steps taken to avoid them will be necessary.

Needless to say, any company with links to the UK should by now be taking steps to ensure that they are properly protected, before this legislation bites.

The Act comes into force on 1 July 2011.

Anil Rajani is a partner at IBB Solicitors and specialises in corporate fraud and white collar crime cases in London and the South East.

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By Nick Graves
13th Apr 2011 11:33

Welcome clarification

looks like all the lavish does that the politicoes regulaly invite themselves to are now clearly defined as prima facie examples of bribery & corruption.

Once they're all imprisoned, maybe we can get on with filing P35s unmolested...

 

 

 

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By Donald2000
13th Apr 2011 13:09

Bent as a nine bob note

I dont think politicians have any business passing this sort of legislation, think Chaytor, Devine, et al and I am sure you will get the picture.

Once again its all about what we as accountants are supposed to be doing; never about the appalling example that politicians are setting.

While we are at it, is there any way of stopping the banks spiriting away our tax revenues to offshore tax havens; thats corruption on a major scale.

Quite frankly the system sucks. I thought this administration were busy getting away from duff legislation, not putting more of it on the statute book.

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By garry.johnson
13th Apr 2011 14:23

Bribery Act 2010

It is difficult to see how such subjective legislation can work. Having spent part of my working life in the public sector and part in the city I can imagine the confusion that will be caused particularly with regard to hospitality.  . What is a bribe to one person is a normal part of public relations to another. No doubt those deciding what a bribe is will be those who would personally feel susceptible to being influenced even by low level entertaining.                                                                                                                                                                                                                 Wimbledon, Twickenham, Glyndebourne, Lords, Henley, Silverstone etc will undoubtedly be linked with challenges under this act along with Covent Garden and other theatrical venues. In my working life I have given and received hospitality in many of these places and never felt that I had been influenced of received favourable treatment because of such activities.

 I am pleased to be retired!

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By rquaye
13th Apr 2011 15:05

Bribery Act 2010

Hospitality functions are adequately covered in the guidance and unless any firm wants to play smart with this and offer bribe then they will have themselves to blame.

Mutinational firms with the US links are already subjected to the FCPA, so the large organisations must already be used to this, granted the 2010 is now tougher than the FCPA.

All that we can do as Accountants is to update ourselves on the requirements and offer help to your clients especially if we offer Internal Audit, Anti Fraud, Forensic Accounting and Compliance services.

The Act is here to stay and we must update ourselves or others will take your clients.

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